Stocks Mixed as Commodities Slide
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9/21/09NEW YORK (TheStreet) — Another pullback looked like it might follow the “short and shallow” pattern, as one observer put it, as stocks recovered slightly amid a slide in commodity-related and housing stocks.
The Dow Jones Industrial Average fell 26 points, to 9794, while the S&P 500 declined 3 points, to 1065. The Nasdaq Composite added 7 points, to 2139.
Stocks started off lower on some profit-taking after the major stock averages posted their greatest weekly gains since July, leaving the S&P 500 more than 20% above its 200-day moving average and prompting Wall Street to rethink valuations. But some observers say it’s “more of the same.”
“Yes, we’re overbought, no doubt about it,” says Jeffrey Saut, chief market strategist for Raymond James. “But markets can stay overbought, especially coming off the base we came off in terms of being oversold.”
Moreover, says Saut, “Most of the pros have underplayed and underinvested and are sitting on too much cash as they come to the fiscal year end, and they have not only performance risk, but they have bonus risk and ultimately job risk — and that’s why corrections have been short and shallow.”
It’s “more of the same,” agrees Charles Rotblut, senior market analyst with Zacks Investment Research. “We’ve had a nice run in the markets and there’s not a lot of positive news [today], but the losses are pretty modest and it’s really just a matter of some profit taking.”
Commodities were at the heart of early weakness as the dollar strengthened. Crude oil , which had topped $72 a barrel, fell $2.70 to $69.34, and gold lost $11.10 to $999.20.
The NYSE Energy Index and the Philadelphia Oil Service Sector index fell 2.1% and 2.5, respectively, and the Philadelphia Stock Exchange Gold and Silver Index dropped 3.5%.
Among individual stocks, Dell(DELL Quote) lost 4.4% early after news that it will buy Perot Systems for $3.9 billion.
Meanwhile, homebuilder Lennar(LEN Quote) also fell 6.2% after it reported a wider third-quarter loss as it continued to write down the value of its land and unsold homes, although the number of new orders rose throughout the quarter.
Fellow housing stocks Toll Brothers(TOL Quote), KB Home(KBH Quote) and Pulte Homes(PHM Quote) were recently more than 1% lower after paring steeper losses from earlier in the session.
Economic data for the day was light with just the Conference Board’s index of leading indicators, which increased just slightly less than expected, by 0.6%.
Meanwhile, much focus this week will be on the Federal Reserve’s two-day policy-making meeting, which will wrap up on Wednesday. Traders will be looking for any clues as to how and when the administration will curb economic relief measures.
Wall Street will also have an eye later this week on a meeting between President Obama and the Group of 20 leaders in Pittsburgh. Of particular interest, the leaders aim to cement a plan that would force banks to curb leverage, hold more equity capital and keep more assets that can be easily traded, Bloomberg reports.
